NEW DELHI: JP Morgan has issued a stark warning about the US stock market, predicting a significant drop in the S&P 500 by the end of the year. The bank’s chief market strategist, Marko Kolanovic, projects the index to fall to 4,200, marking the lowest year-end target among major Wall Street banks. This forecast implies a more than 21% decline from current levels.
“With very high equity valuations, we do not see equities as attractive investments at the moment, and we don’t see a reason to change our stance,” Kolanovic wrote in an analyst note this week. This pessimistic outlook is one of the most severe on Wall Street, a Fox News report said.
Despite recent record highs, including the Dow Jones Industrial Average surpassing 40,000 for the first time and the S&P 500 reaching over 5,300, Kolanovic suggests these gains are unlikely to last. He cites several factors contributing to the bearish forecast, including sustained high interest rates, signs of persistent inflation, evidence of financial strain among lower-income consumers, and increasing geopolitical uncertainties.
Kolanovic also pointed out that the recent boost from artificial intelligence developments is unlikely to counterbalance these traditional market challenges. “We don’t think that narrow themes like AI chips can compensate for all of those traditional market challenges that historically worked against the cycle,” he said.
This gloomy forecast follows a volatile year for the stock market. All three major indexes experienced significant declines in mid-2023 due to fears that the Federal Reserve would raise interest rates higher than expected and maintain them at peak levels for an extended period. However, the indexes have since recovered those losses and more, with the S&P 500 up more than 29% since its low at the end of October.
Year-to-date, the S&P 500 has risen about 11.5%, the Dow Jones Industrial Average has climbed 5.5%, and the Nasdaq Composite has increased about 12%. Despite these gains, the warning from JPMorgan suggests that investors should brace for potential turbulence ahead.
“With very high equity valuations, we do not see equities as attractive investments at the moment, and we don’t see a reason to change our stance,” Kolanovic wrote in an analyst note this week. This pessimistic outlook is one of the most severe on Wall Street, a Fox News report said.
Despite recent record highs, including the Dow Jones Industrial Average surpassing 40,000 for the first time and the S&P 500 reaching over 5,300, Kolanovic suggests these gains are unlikely to last. He cites several factors contributing to the bearish forecast, including sustained high interest rates, signs of persistent inflation, evidence of financial strain among lower-income consumers, and increasing geopolitical uncertainties.
Kolanovic also pointed out that the recent boost from artificial intelligence developments is unlikely to counterbalance these traditional market challenges. “We don’t think that narrow themes like AI chips can compensate for all of those traditional market challenges that historically worked against the cycle,” he said.
This gloomy forecast follows a volatile year for the stock market. All three major indexes experienced significant declines in mid-2023 due to fears that the Federal Reserve would raise interest rates higher than expected and maintain them at peak levels for an extended period. However, the indexes have since recovered those losses and more, with the S&P 500 up more than 29% since its low at the end of October.
Year-to-date, the S&P 500 has risen about 11.5%, the Dow Jones Industrial Average has climbed 5.5%, and the Nasdaq Composite has increased about 12%. Despite these gains, the warning from JPMorgan suggests that investors should brace for potential turbulence ahead.
